- Bogazici University, Department of Economics,
Natuk Birkan Building, Bebek, Istanbul, Turkey - +902123596677
Orhan Torul
Bogazici University, Economics, Faculty Member
- My name is Orhan Torul. I am an associate professor in the Department of Economics at Boğaziçi University. My researc... moreMy name is Orhan Torul. I am an associate professor in the Department of Economics at Boğaziçi University. My research primarily focuses on macroeconomics, economic inequality, political economy, and public policy.edit
We examine the relationship between intergenerational educational mobility and individual preferences for redistribution. We offer a parsimonious economic model predicting that conditional on own education, those with more highly educated... more
We examine the relationship between intergenerational educational mobility and individual preferences for redistribution. We offer a parsimonious economic model predicting that conditional on own education, those with more highly educated parents and facing higher intergenerational persistence will prefer less redistribution. We test these predictions empirically using country-cohort-gender-specific estimates of intergenerational educational mobility and individual-level survey data from 41 European countries. Our estimation results confirm the theoretical predictions, demonstrating that higher parental education and more promising mobility prospects are significantly associated with lower preferences for income redistribution. These findings highlight the critical need for policies that enhance educational accessibility and affordability to improve intergenerational mobility prospects, which could strengthen redistributive preferences and promote greater equality.
Research Interests:
This paper examines cooperation and punishment in a public goods game in Istanbul. Unlike prior within-subject designs, we use a between-subject design with separate no-punishment and punishment conditions. This approach reveals that... more
This paper examines cooperation and punishment in a public goods game in Istanbul. Unlike prior within-subject designs, we use a between-subject design with separate no-punishment and punishment conditions. This approach reveals that punishment significantly increases contributions, demonstrating the detrimental effect of having prior experience without sanctions. We highlight two critical factors-heterogeneous initial contributions across groups and how subjects update their contributions based on prior contributions and received punishment. An agent-based model verifies that the interaction between these two factors leads to a strong persistence of contributions over time. Analysis of related data from comparable cities shows similar patterns, suggesting our findings likely generalize if using a between-subject design. We conclude that overlooking within-group heterogeneity biases cross-society comparisons and subsequent policy implications.
Research Interests:
In this study, we examine intergenerational income mobility in Turkey using data from the Turkish Statistical Institute's Survey of Income and Living Conditions and the TS2SLS methodology. Our findings reveal an intergenerational earnings... more
In this study, we examine intergenerational income mobility in Turkey using data from the Turkish Statistical Institute's Survey of Income and Living Conditions and the TS2SLS methodology. Our findings reveal an intergenerational earnings elasticity of 0.51 between fathers and sons and 1 between fathers and daughters. This gender disparity stems from historically low female labor force participation and self-selection of women into employment in Turkey. Our estimates for household income elasticity for both sons and daughters are similar, at around 0.8. We also observe a slight decrease in intergenerational mobility for more recent birth cohorts, consistent with trends in other countries. Our further analysis using rank-rank slopes and transition matrices indicates weak intergenerational rank mobility and strong persistence at both ends of the income distribution in Turkey.
Research Interests:
We investigate the role of intergenerational transmission in educational outcomes and inequalities for cohorts born between 1951 and 1985 in Turkey via the Turkish Statistical Institute’s Intergenerational Transmission of Disadvantages... more
We investigate the role of intergenerational transmission in educational outcomes and inequalities for cohorts born between 1951 and 1985 in Turkey via the Turkish Statistical Institute’s Intergenerational Transmission of Disadvantages Module in 2011. Our results show that Turkey has a relatively low degree of intergenerational educational mobility. Further, the primary measures of intergenerational educational mobility – the regression and correlation coefficients via years of schooling – exhibit a U-shape over the sample period. Our first decomposition exercise reveals that the early cohorts’ improving intergenerational mobility stems mainly from the educational improvements of descendants born to low-educated fathers. In contrast, the recently increasing intergenerational correlation stems from the disproportionately favorable university prospects of descendants born to university graduate fathers. Moreover, we decompose the correlation coefficient via a second methodology and show that 91% of the correlation stems from within-subgroup correlations. Specifically, the contribution of urban (rural) males and females average 32% and 44% (7% and 8%), respectively.
Research Interests:
In this paper, we investigate the behavior of the marginal cost of public funds (MCF) for different taxes under the presence of informality. We build a dynamic general equilibrium model with formal and informal sectors and allow the... more
In this paper, we investigate the behavior of the marginal cost of public funds (MCF) for different taxes under the presence of informality. We build a dynamic general equilibrium model with formal and informal sectors and allow the government to use consumption, capital, and labor income taxes to raise revenue. Using country-level data on taxes, we calibrate and measure MCF for a cross-section of economies. Our results show that different taxes have distinct cost responses to changes in the informal sector size in each country: while MCF of the consumption tax decreases with the increase in the informal sector size, the MCF of the income taxes, capital and labor, display an opposite behavior. Moreover, omitting the informal sector results in an underestimation in the MCF of capital income tax and overestimation in that of the consumption tax.
Research Interests:
In this paper, we study high-stakes risky choices of contestants in the Turkish edition of the popular TV game show Deal or No Deal. We conduct a large-scale replication of Post, Van den Assem, Baltussen, and Thaler (2008), and we... more
In this paper, we study high-stakes risky choices of contestants in the Turkish edition of the popular TV game show Deal or No Deal. We conduct a large-scale replication of Post, Van den Assem, Baltussen, and Thaler (2008), and we investigate contestant behavior in Turkey in detail via the expected utility and cumulative prospect theory. We find strong empirical support on the role of path dependence in shaping risk attitudes: Turkish contestants who enjoy early gains or suffer early losses in the initial rounds of the game are more risk-lover than other contestants, which aligns well with the break-even and house-money effects à la Thaler and Johnson (1990). We also document that the cumulative prospect theory predicts contestant behavior better than the expected utility theory empirically. Finally, we demonstrate that risk aversion exhibits sizable heterogeneity over demographics, and female and university-graduate contestants are more risk-averse than their male and lesseducated counterparts.
Research Interests:
In this paper, we investigate labor income profiles in Turkey. In doing so, we study the role of educational attainment, gender and the public versus private sector employment on labor income profiles by using the Turkish Statistical... more
In this paper, we investigate labor income profiles in Turkey. In doing so, we study the role of educational attainment, gender and the public versus private sector employment on labor income profiles by using the Turkish Statistical Institute's Household Labour Force Survey micro-data from 2004 to 2018. We first report that while the average labor income profile in Turkey exhibits a moderate hump-shape over age, there exists an immense degree of heterogeneity in labor income trajectories over education, gender and the sector of employment. Second, while the public sector employment is more advantageous for low-educated Turkish employees, university graduates in Turkey's labor market face a risk versus return trade-off in their choice of the sector of employment: the private sector labor income profiles display a similar level of average income but a higher degree of cross-sectional variation compared to their public sector counterparts. Third, we report a significant gender pay gap, especially among low-educated workers, which aligns well with historically low female participation rates in Turkey. Our findings via distributional clustering analysis, ordinary least squares and pseudo-panel estimations all indicate that in attempts to infer economywide average labor income profiles, abstracting away from any of these listed factors could lead to misleading inferences.
Research Interests:
We study the intrinsic incentives that drive behavior in redistributive institutions with various levels of enforcement. We are interested in how the opportunistic incentive to use a redistributive institution for personal gain and the... more
We study the intrinsic incentives that drive behavior in redistributive institutions with various levels of enforcement. We are interested in how the opportunistic incentive to use a redistributive institution for personal gain and the desire to follow norms of a regulated community, populated by similarly obedient individuals, interact and determine the success or failure of an institution. In the experiment, subjects can repeatedly join one of three institutions, which are defined by explicitly stated rules that require them to put all, half, or any amount of income in a tax pool for redistribution. The treatments differ in the level of enforcement of these rules. We find that contributions are sustained only when free riding is not possible. However, subjects with a generally strong propensity to follow norms persist in following the rules of redistribution even after experiencing many periods of losses due to free riding. We find that these subjects also perceive the same level of income inequality as fairer, when it was achieved without breaking the rules, and favor redistributive mechanisms with more stringent rules. This suggests that well-defined redistributive rules can create a powerful incentive for cooperation as many individuals seem to prefer stable regulated egalitarian institutions to unregulated libertarian ones. Some form of enforcement is, nevertheless, required to protect egalitarian institutions from exploitation by free riders.
Research Interests:
We investigate the evolution of Turkey's wage, income and consumption inequalities using a crosscountry comparable methodology and the Turkish Statistical Institute's Household Budget Survey and the Survey of Income and Living Conditions... more
We investigate the evolution of Turkey's wage, income and consumption inequalities using a crosscountry comparable methodology and the Turkish Statistical Institute's Household Budget Survey and the Survey of Income and Living Conditions micro data sets. Turkey's wage, income and consumption inequalities all exhibit downward time trends over the 2002-2016 period. This observation aligns well with the rapid minimum wage growth over the period. While wage inequality estimates display strong countercyclicality, income and consumption inequalities exhibit rather acyclical time-series movements. While recent education premium estimates of Turkey are similar to those in the early 2000s, estimates of recent gender and experience premiums, as well as residual wage inequality are lower. Income and consumption inequality estimates exhibit similar time trends with moderate level differences, and these trends are robust to the choice of inequality metrics.
Research Interests:
I propose a novel heterogeneous-agent model featuring public and private education in the choice set of households, positive human capital externalities, and distortionary taxes for public education financing to study transatlantic... more
I propose a novel heterogeneous-agent model featuring public and private education in the choice set of households, positive human capital externalities, and distortionary taxes for public education financing to study transatlantic differences in public versus private education investment, tax rates, and economic distributions. I show that exogenous tax differences alone can generate most of the observed transatlantic disparities in this model. I also demonstrate that this model can explain how either of the calibrated US and European tax regimes can gain public support due to the U shape of aggregate variables over taxes, as also seen in the data.
Research Interests:
In this paper, we study optimal Ramsey taxation under endogenous risk aversion formulation in an otherwise standard real business cycle economy. We show that when the risk aversion coefficient co-moves counter-cyclically, the canonical... more
In this paper, we study optimal Ramsey taxation under endogenous risk aversion formulation in an otherwise standard real business cycle economy. We show that when the risk aversion coefficient co-moves counter-cyclically, the canonical Chamley–Judd (Chamley, 1986; Judd, 1985) result does not hold true, and the Ramsey planner chooses a positive capital income tax rate in the long run. We report that result is due to additional wedges both in the intratemporal and the intertemporal optimality condition of the representative household.
Research Interests:
In this paper, we study Turkey's income and wealth distribution using a model-based approach via a modified Aiyagari (1994) model. In doing so, we use recent parameter estimates for Turkey and calibrate our model to match Turkey's income... more
In this paper, we study Turkey's income and wealth distribution using a model-based approach via a modified Aiyagari (1994) model. In doing so, we use recent parameter estimates for Turkey and calibrate our model to match Turkey's income and wealth inequality measures. We document that our calibrated model matches Turkey's empirical economic inequality metrics with high precision, therefore can be used to infer Turkey's wealth distribution, which lacks data and detailed analysis. We compare Turkey's inequality measures with other countries, and display that by any conventional metric, Turkey qualifies as one of the more unequal economies. Finally, we quantify the welfare cost of inequality, and report that in order not to switch to the unequal Turkish economy, a utilitarian benevolent planner of Turkey's counter-factual representative-agent economy would be indifferent to forgoing 25.15% of steady-state consumption along with working an extra 33.61% of steady-state hours indefinitely.
Research Interests:
In this paper, I investigate the effects of alternative risk aversion formulations on business cycle properties of an otherwise standard real business cycle economy. I first report on the implications of different risk aversion... more
In this paper, I investigate the effects of alternative risk aversion formulations on business cycle properties of an otherwise standard real business cycle economy. I first report on the implications of different risk aversion formulations on impulse response functions of real variables, and show that when risk aversion coefficient co-moves counter-cyclically, responses of real variables vary sizeably due to additional wedges both in the intratemporal and the intertemporal margin. Next, I show that formulating the risk aversion coefficient as random walk instead of a deep structural parameter generates better fit with observed volatilities of real variables. Finally, I report that modelling risk aversion coefficient in an endogenously-driven counter-cyclical way improves match with data on real variable correlations.
Research Interests:
In this paper, we empirically investigate the relationship between informal sector employment and micro-level socio-demographic characteristics, political acts and attitudes, and individual norms. Using self-reported individual... more
In this paper, we empirically investigate the relationship between informal sector employment and micro-level socio-demographic characteristics, political acts and attitudes, and individual norms. Using self-reported individual micro-level data from the World Values Survey for seven developing countries (China, Ecuador, Egypt, Mexico, Peru, South Africa and Yemen), our crosscountry regressions and principal component analysis reveal that socio-demographic characteristics of individuals are strong predictors of their informal sector employment. Our estimations further document that individual preferences for an economically strong, interventionist and egalitarian state and confidence in state and political institutions are positively and significantly correlated with informal sector employment, whereas variables associated with confidence in free market institutions and support for competition are negatively and significantly correlated with informal sector employment. We also show that individuals who participate either actively or inactively in peaceful and lawful political processes are significantly less likely to work in the informal sector. Finally, we document that individual norms, such as religiosity and tax morale, are negatively correlated with informal sector employment. Throughout our analysis, instead of having to rely on ad-hoc informality categorizations of third parties, we base our measurement of informal sector employment directly on the self-evaluation of individuals, who have the best information on the degree of their informality.
Research Interests:
In this paper, I revisit the "Shimer puzzle" by comparing business-cycle properties of three prominent labor-search models. Providing a standard framework for contrasting the three models, I first quantify the sensitivity of Shimer... more
In this paper, I revisit the "Shimer puzzle" by comparing business-cycle properties of three prominent labor-search models. Providing a standard framework for contrasting the three models, I first quantify the sensitivity of Shimer (2005)'s relative labor market tightness volatility to business cycle smoothing parametrization. Second, I document that Hagedorn and Manovskii (2008)'s proposed solution to the Shimer puzzle depends considerably on whether the value of nonmarket activity responds to business cycle fluctuations. Third, I report that when specified in the form of a decreasing-returns-toscale functional form, the incorporation of decreasing average vacancy posting costs by Pissarides (2009) cannot generate decent business-cycle volatilities in the absence of further wage stickiness. Overall, my findings point to the particular need for further exploring the degree of co-movement between wage rate and nonmarket activity in labor-search modelling attempts.
Research Interests:
In this paper, the authors empirically investigate the relationship between energy consumption and the size of the informal economy. Relying on panel data regression models, their results show that at the aggregate level, energy intensity... more
In this paper, the authors empirically investigate the relationship between energy consumption and the size of the informal economy. Relying on panel data regression models, their results show that at the aggregate level, energy intensity is inversely related to the size of the informal sector, providing actual empirical evidence on the presence of high labor and low capital intensity in the informal economy. Furthermore, the authors also find some support towards the presence of non-linearity and asymmetry in this relationship.
Research Interests:
In this paper, we investigate the nature of the negative relationship between the unemployment rate and the labor force participation rate in Turkey. We report that the discouraged unemployed worker phenomenon is not the main driving... more
In this paper, we investigate the nature of the negative relationship between the unemployment rate and the labor force participation rate in Turkey. We report that the discouraged unemployed worker phenomenon is not the main driving force behind the documented negative co-movement. We show that the negative relationship can be explained instead by 1) the simultaneous inflow of workers to the employed state from the inactive and unemployed states when the unemployment rate decreases, and 2) the simultaneous outflow of workers from the employed state to the inactive and the unemployed states when the unemployment rate increases. We also report that empirical intertemporal labor market transitions of couples do not provide evidence for within-household risk sharing in Turkey.
Research Interests:
We investigate the relationship between oil prices and manufacturing sector of a small open economy, Turkey. We take into account exogeneity of oil prices, extreme oil-reliance and importdependence, as well as asymmetric responses of oil... more
We investigate the relationship between oil prices and manufacturing sector of a small open economy, Turkey. We take into account exogeneity of oil prices, extreme oil-reliance and importdependence, as well as asymmetric responses of oil product prices to world crude oil price changes. We also control for the global liquidity and domestic finance conditions, along with real exchange rate dynamics in our VAR estimations. We report that while oil price increases do not significantly affect the manufacturing sector in aggregate terms, some sub-sectors are adversely affected.
Research Interests:
We empirically investigate the impact of shocks to world crude oil prices on retail gasoline prices in Turkey during the 1991-2007 period. Using a Structural-VAR methodology and monthly frequency data, we report that Turkish retail... more
We empirically investigate the impact of shocks to world crude oil prices on retail gasoline prices in Turkey during the 1991-2007 period. Using a Structural-VAR methodology and monthly frequency data, we report that Turkish retail gasoline prices respond significantly to increasing world crude oil prices, but not to decreases. During the estimation period, 70 to 80% of the retail gasoline price was attributable to taxes which were subject to frequent changes by the council of ministers. Although historical data on gasoline taxes is not publicly available, based on the importance of taxes on gasoline price formation in Turkey, we argue that the source of asymmetry is mainly attributable to government price setting policy choice for gasoline. Based on the observed asymmetry from empirical analysis, we further argue that rather than smoothing the impact of volatility in world crude oil prices on Turkish retail gasoline prices, the Turkish fiscal authorities attempted to maximize tax revenue from gasoline.
Research Interests:
When compared to the previous literature which analyzes oil price changes and real economic activity for countries influencing world demand and/or supply, this study is first of its kind in investigating the relation within the context of... more
When compared to the previous literature which analyzes oil price changes and real economic activity for countries influencing world demand and/or supply, this study is first of its kind in investigating the relation within the context of a small open economy, Turkey. Parallel to the results of Blanchard and Gali (2007) for developed economies, we first report for Turkey that the negative response of real output to oil price increases have diminished since the early 2000s. Other than using different versions of oil price changes and real output growth, which are the standard variables used in the empirical literature, in our next set of estimations we also include variables to account for global liquidity conditions. Once these variables are incorporated, we unveil that the negative impact of oil price changes on aggregate economic activity is significant even in the post-2000 period.